July 23, 2021: Asian markets wobbled Friday as investors struggled to maintain a global rally into a third day despite another batch of healthy corporate earnings, with the Delta variant continuing to cast a shadow across trading floors.
Wall Street's three main indexes closed near new records Thursday, fuelled by better-than-expected corporate reports and a seemingly unbreakable optimism about the long-term economic recovery thanks to colossal government stimulus and central bank largesse.
That positive mood has managed to withstand its toughest test yet, which is in the frightening spike in new coronavirus cases around the world — even those with good vaccination rates — that has forced several governments to reimpose lockdowns or containment measures.
European traders were given an extra lift by a pledge from the European Central Bank that while the eurozone was bouncing back strongly, it would maintain its ultra-loose monetary policies until at least the end of March 2022, or until officials consider “that the coronavirus crisis phase is over”.
But Asian markets were more sluggish in early trade, with Hong Kong, Shanghai, Wellington, Manila and Jakarta all in the red, while Sydney, Singapore, Seoul and Taipei edged up. Tokyo was closed for a holiday.
Still, analysts remain convinced that the latest stumble will give way to more gains for equities as more vaccines are administered, and despite the Delta surge.
“One of the most under-appreciated things about the equity markets right now is just how much these (company) earnings have risen, and how much analysts have had to revise their earnings estimates up,” Tracie McMillion, at Wells Fargo Investment Institute, told Bloomberg Television.
She said she was keeping tabs on the Delta spread in case it had an effect on consumer behaviour and the shift in the recovery from “great to really good”.
And market strategist Louis Navellier said any concerns that the Federal Reserve would consider tightening monetary policy would be soothed by an uneven recovery in the jobs market after data showed a surprise jump in unemployment claims.
He said the bank's policy meeting next week would be pored over for any clues about its plans.
“Since the ECB was dovish with its statement… and boosted its quantitative easing, I expect that the Fed will also have a dovish (policy) statement,” he said in a note.
“This means that 'Goldilocks' is expected to continue, which is an accommodative Fed and strong economic growth.”
However, he added that US 10-year Treasury yields were dropping as investors shifted into safer havens owing to worries about Delta.
“This means that either inflation fears are ebbing or there is a flight to quality as the Covid-19 Delta fears spread. Frankly, I believe that although energy prices are moderating, the Covid-19 Delta fear of the global economy slowing is the biggest culprit behind falling Treasury bond yields.”
– Key figures around 0230 GMT –
Hong Kong – Hang Seng Index: DOWN 1.0 percent at 27,455.33
Shanghai – Composite: DOWN 0.5 percent at 3,557.79
Tokyo – Nikkei 225: Closed for a holiday
Pound/dollar: DOWN at $1.3761 from $1.3766 at 2020 GMT
Dollar/yen: UP at 110.25 yen from 110.18 yen
Euro/dollar: UP at $1.1775 from $1.1772
Euro/pound: UP at 85.59 pence from 85.49 pence
West Texas Intermediate: DOWN 0.3 percent at $71.72 per barrel
Brent North Sea crude: DOWN 0.2 percent at $73.62 per barrel
New York – Dow: UP 0.1 percent at 34,823.35 (close)
London – FTSE 100: DOWN 0.4 percent at 6,968.30 (close).